- LOLC says acquisition is aimed at capturing post-COVID growth in tourism business
- Hemas says divestment is part of group’s portfolio direction and focuses on uplifting return on equity from core segments
LOLC Holdings PLC’s strategic investment arm, Browns Investments PLC (BI), yesterday acquired the controlling stake of 55.65 percent of Serendib Hotel PLC, a subsidiary of Hemas Group, for a consideration of Rs.792 million.
With this acquisition, BI will hold 56.67 percent of voting shares and 53.48 percent of non-voting shares of Serendib.
BI’s subsidiary leisure company, Eden Hotel Lanka PLC, made the investment.
The voting shares, which amounted to 42.8 million, were bought at Rs.14.20 per share, for a consideration of Rs.608 million, while the non-voting shares, amounting to 19.2 million, were bought at Rs.9.60 a share.
Serendib voting share closed at Rs.18.40 yesterday, down 50 cents or 2.65 percent, while the non-voting share closed at Rs.11.10, down Rs.1.70 or 13.28 percent.
The net asset value of Serendib Hotels PLC, as at September 30, 2020, was Rs.18.78.
The acquisition will trigger a mandatory offer.
Serendib Hotels PLC is the majority shareholder of Dolphin Hotels PLC, Hotel Sigiriya PLC, Serendib Leisure Management Ltd, Frontier Capital Lanka (Pvt.) Ltd and Sanctuary Resorts Lanka (Pvt.) Ltd.
“In line with the group’s portfolio direction and focus on uplifting return on equity from the core segments, we have made a strategic decision to increase investments within our consumer, healthcare and mobility sectors,” Hemas Group CEO Kasturi Chellaraja Wilson said in a statement.
However, Hemas said it would continue to hold a few leisure sector assets, which includes its investment in Anantara Peacehaven Tangalle Resort.
Asia Securities Advisors (Pvt.) Ltd acted as the sole advisor to Hemas on this transaction.
Meanwhile, with this investment, BI will add Club Hotel Dolphin, Hotel Sigirya, Avani Bentota Resort and Lantern Beach Collection, Mirissa, along with its management companies to BI’s existing leisure portfolio.
It consists of The Eden Resort & Spa in Beruwala, The Paradise Resort & Spa in Dambulla, The Calm Resort & Spa in Passikudha and Dickwella Resort & Spa, Sheraton Kosgoda Turtle Beach Resort managed by the Marriott group and Riverina Resort in Beruwala with 375 keys, which is under construction.
In the Maldives, BI’s leisure properties under construction include Nasandhura Palace Hotel in the city of Malé and Bodufinolhu in Ari Atol.
Nasandhura Palace is in the most coveted location in the city, nearing construction and will be ready for occupancy in the year 2021 and is a mixed development consisting of 118 luxury apartments, a five-star hotel with 135 keys and an upscale mall with shopping and entertainment. Bodufinolhu, an international four-star property, once ready for commercial operations in 2021, will have a mix of water villas, beach villas and beach suites accounting for 100 keys.
The group also has the lease rights to three islands reclaimed in North Malé, Bodufaru and Kaafu Atol, which is to be developed as three five-star properties with a total of 470 keys. BI entered into a management agreement with Barceló, one of the largest global hotel operator chains, to manage The Eden Resort and Spa, The Paradise Resort and Spa, Nasandhura and Bodufinolhu.
Further, Barceló is to make an equity investment of 30 percent into the development of Bodufaru three-island project. The new investment will expand the leisure footprint of BI and the company is of the view that this will be a strong growth sector post COVID-19, gaining momentum in the latter part of 2021.
The company believes that the new investment will complement its long-term leisure strategy of building a diverse leisure portfolio in Sri Lanka and the Maldives.
Over the years, BI has developed its diverse investment portfolio, expanding its operations into construction and related businesses, plantations and other strategic investments.
The construction business has seen a significant growth, with Browns Engineering & Construction becoming one of the most sought-after telecom engineering companies in the country.
The construction sector businesses are showing great potential in the medium to long term, with Ajax Engineers – the aluminum fabricating arm, Gurind Accor – the renowned tempered glass supplier, General Accessories – the leading powder coating services provider and Creations Wooden Fabricators – suppliers of interior and furniture solutions for commercial purposes, complementing the overall business strategy of the construction sector, with a wide range of construction-related businesses.
BI is also the single largest shareholder of the Sierra Group.
The plantation investment of BI, Maturata plantations, a prominent manufacturer of premium-branded tea and cinnamon, is performing extremely well, despite the current economic crisis, recording excellent operating results.
The company owns the largest cinnamon plantation in the country and the recent investments made into this sector is now reaching the stage of harvesting and the timely acquisition of Tropical Island Commodities, a cinnamon exporting business with an established sales channel in the global cinnamon market, will certainly enrich the plantation business.
On the agriculture side, BI also holds a substantial stake in Agstar PLC, the second largest fertiliser company in the country.
The plantation business in Sierra Leone, Sunbird Bio Energy Ltd (SBSL) acquired in 2018/19, is now realigned and geared to produce 50 million litres of ENA in the coming season, with the company ramping up its plantation from 5,000 hectares to reach 12,000 hectares within the next two seasons.
SBSL owns the largest Bio ENA plant in the West African region. The company also secured a further 15 years contract with the government to export 120GWh power to the main grid at an attractive price of US $ 14 cents.
In Sri Lanka, BI also owns the majority stake in the first commercial solar power plant, Saga Solar (Pvt.) Ltd, which has a 10 MW power plant in Buruthakanda, Hambantota.
“The carefully executed investment strategy of BI with a focus in the leisure sector building the optimum footprint, is well positioned to capture the post-COVID growth in the tourism business. Building the construction business with complementary businesses and growth in the agriculture and plantations with expansion into value chain development will position Browns Investments as a strong and robust diversified group within LOLC Group with strong shareholder value creation in the medium to long term,” BI Chairman Ishara Nanayakkara said.